Anglo Pacific Group PLC (“Anglo Pacific”, the “Company”) (LSE: APF, TSX: APY) is pleased to announce that it has entered into a definitive agreement with Cancap Investments Limited (“Cancap”) to acquire Cancap’s royalty interest in the Maracás Vanadium Project (“Maracás Project”), located in Brazil and operated by TSX Venture Exchange listed Largo Resources Limited (“Largo”) (TSX-V:LGO).
Anglo Pacific will pay Cancap total consideration of up to US$25 million in cash and will issue Cancap certain warrants, in exchange for its 2% net smelter return (“NSR”) royalty interest on all mineral products sold from the area of the Maracás Project to which the royalty interest relates (the “Royalty”).
Total consideration is payable as follows:
- US$22 million payable in cash on completion of the sale to Anglo Pacific of the Royalty (“Completion”);
- A further US$1.5 million payable in cash when the Maracás Project reaches, over a calendar quarter, sales of an annualised production rate of 9,500t V2O5 equivalent;
- A further US$1.5 million payable in cash when the Maracás Project reaches, over a calendar quarter, sales of an annualised production rate of 12,000t V2O5 equivalent; and
- 500,000 warrants will be issued to Cancap on Completion. Each warrant will entitle the holder to acquire one Anglo Pacific ordinary share at a strike price of £2.50 and will be exercisable for 5 years. The warrants will not be admitted to trading on any exchange.
The Maracás Project is due to commence production in the near term and is forecast to produce an average annual production of approximately 25.1 Mlbs (11,400t) V2O5 equivalent over a 29 year mine life(1) (in respect of the mine area to which the Royalty relates). According to recent Largo disclosure, the commissioning of the Maracás mine is now complete (2). Largo has also entered into an off-take agreement with Glencore International AG for all vanadium products produced at the Maracás Project for the first 6 years of commercial production.
Completion of the transaction with Cancap is expected by June 11, 2014.
Commenting on the acquisition, Julian Treger, Chief Executive Officer of Anglo Pacific, said:
“The acquisition of the Maracás royalty ticks all of the boxes for Anglo Pacific and reflects the commitment to expanding our portfolio with royalties focused on high quality base metals and bulk commodity mining projects that have existing or near-term production. Due to the Maracás Project’s high-grade resource, it is expected to be a low cost vanadium producer once it reaches full capacity.
The Maracás royalty provides additional commodity diversification to the Anglo Pacific royalty portfolio through exposure to vanadium, a commodity which we believe has strong underlying fundamentals driven by China’s and other developing economies’ increasing demand for high quality alloyed steel.
Anglo Pacific is also pleased to announce that it has appointed Barclays Bank PLC to work alongside BMO Capital Markets Limited as Joint Corporate Broker with immediate effect.
Analyst conference call
There will be an analyst conference call on June 2, 2014 at 09:30 (BST). The call can be accessed by dialling +44 (0)20 8515 2313 and quoting ‘Anglo Pacific update call’.
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